Whilst FedEx Sounds The Alarm For Global Trade, Can UBS Weather The Storm? | FDX, UPS

Whilst FedEx Corp is on the brink of breaking key support, UPS is just 4% from its YTD.

Whilst FedEx Corp is on the brink of breaking key support, UPS is just 4% from its YTD. Disappointing earnings and a lowered full-year outlook saw FedEx plummet over -10% at market open last Tuesday, and it was the main reason behind the Dow Jones Transportation sell-off whilst also triggering fresh concerns for the global economy.


We can see that FedEx performance can be taken as a bellwether for global trade by comparing the YoY% of FedEx with YoY Trade volume. Whilst the correlation is not perfect, its still a decent enough proxy and would suggest that global trade is to drop further (and therefor, global growth and potential for further easing from central bankers).


Looking at the daily FedEx chart, prices has been oscillating between 148 – 178 since June, although the 200-day average capped as resistance near the top of the range before rolling over to the low of the range. In fact, FedEx closed to a 3-year low yesterday and sits just ticks above key support.

  • Given the series of lower highs and pick-up of bearish momentum, we’re waiting for prices to break the June 2016 low to signal a resumption of the bearish trend.
  • Bearish target is around 120 (just above the January low).
  • Whilst the trend remains bearish below 176.76, we’d step aside with a break above 154.57 as it warns of a corrective bounce from key support. We’d then look to reassess the potential for a short trade if a new lower high is created, beneath 176.76.


Interestingly, their rival UPS isn’t facing the same headwinds with the stock trading just 4% from this year’s highs. Still, it’s failed to retest the 125 high so there is potential for this one to roll over too. But perhaps another way to look at this is as an inter-sector pairs trade, given the ratio between UPS/FDX has been rising sharply.

  • Looking at the weekly chart, USD has outperformed FDX on a relative basis since early 2018 when the ratio broke above its bearish trendline. Given the ratio is rising rapidly, there could still be some juice left for this pair.
  • Last week’s bearish elongated Doji warns of near-term weakness, yet the stock continues to outperform Fedex on a relative basis
  • Price action on UPS broke above its bearish correction line in July and continues to print higher lows to show the trend is bullish.
  • A break above 125 assumes bullish continuation, whilst the potential for a deeper correction remains whilst it trades below 123.63

 

Related analysis:
U.S. banks face fresh chill as earnings loom
Thomas Cook fallout: travel and insurance firms in the front line
Stocks: Investors weigh German recession odds against central bank support
[Video] Bears Regain Control Over Netflix

Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.